Investment Update – 11 May 2020

Since our last investment update investment markets have continued to show signs of optimism as relaxing of social restrictions are starting to be deployed globally and domestically. This, coupled with the unprecedented Government stimulus measures has seen investors re-enter share markets resulting in solid gains since the recent lows of mid-March.

Market snapshot for April:

Australian Share Market

After a 20% increase in the ASX All Ordinaries since the recent market bottom in mid-March, more recently the ASX appears to be range bound between 5,300 to 5,600 points as the chart below highlights.

Given the uncertainty around easing of social restrictions and outlook for corporate earnings, the recent rally demonstrates that patience will likely be rewarded over the longer term. When economic activity returns to a more normalised environment, the risk appetite for investors should return, this is particularly true given the low interest rates available on bank deposits.  

The chart below shows the previous 2 months (11 March to 11 May) of the ASX All Ordinaries index and incorporates the recent low-point on 23 March and the subsequent rebound through late March extending into April.

Interest rates:

The RBA have held interest rates at a record low of 0.25%, citing the cash rate will not increase until the full economic impact of COVID-9 becomes clearer and unemployment guidance improves.   

International Share Markets:

Similar to Australia, Global equities closed out April with their biggest monthly gains since 2011 as markets reacted positively to global Government stimulus measures. The attitude of overseas Government’s to do ‘whatever it takes’ to combat the disruption caused by COVID-19 has started to have a positive effect on share markets.

Summary

While it is difficult to see a clear direction to what post COVID-19 looks like, we will continue to work with you to position your investments for long term outcomes, not short-term reactions.  We continue to believe that being well diversified, staying invested and showing patience will see investors rewarded over the longer term.